Liberalized Sri Lanka foreign exchange law from Oct 15
ECONOMYNEXT – Sri Lanka’s new foreign exchange law, which decriminalizes violations and allows money held abroad to be brought back easily, will come into effect from October 15, 2017, as government notice said.
Prime Minister and Minister of National Policies and Economic Affairs Ranil Wickremesinghe has issued a gazette notice giving effect to the law Foreign Exchange Act No 12 of 2017.
According to the law, investigations started under the old law, will continue and will be concluded within six months of the new legislation coming in to effect.
Undeclared money held abroad up to million dollar could be brought in with no penalty under the new law and amounts in excess could be brought with the payment of a one percent fee, provided they are not under restraint from money laundering, terrorist finance or bribery laws.
Sri Lanka enacted progressively draconian foreign exchange controls after a money printing central bank was set up in 1951, abolishing a currency board that had kept the exchange rate fixed and inflation low from 1885.
Citizens who tried to protect their hard earned wealth from being expropriated by the central banks and the state through currency depreciation were criminalized by the old law.
The central bank weakened a dollar peg either by printing money to finance the deficit, or sterilizing interventions to stop rates from going up, after triggering a balance of payments crisis by failing to raise rates to curb excessive credit growth.
Restrictions on convertibility was one of the freedoms lost by Sri Lanka residents after gaining self-determination from British rule and setting up a soft-pegged central bank.
"The extent of the control over all life that economic control confers is nowhere better illustrated than in the field of foreign exchanges," wrote economist Friedrich von Hayek in Road to Serfdom
"Nothing would at first seem to affect private life less than a state control of the dealings in foreign exchange, and most people will regard its introduction with complete indifference.
"Yet the experience of most Continental countries has taught thoughtful people to regard this step as the decisive advance on the path to totalitarianism and the suppression of individual liberty.
"It is, in fact, the complete delivery of the individual to the tyranny of the state, the final suppression of all means of escape—not merely for the rich but for everybody."